Business Setup in India: Which Structure Should You Use?

Business setup in India starts with one decision that quietly determines everything after it: which legal structure you use.

Get it right and you pay Indian corporate tax rates and can do whatever your business needs. Get it wrong and you can be taxed at 35%, or find you are legally barred from invoicing your own customers.

That is what this guide is for. Not the filing steps, and not whether India is the right market. Just the structure question, answered properly.

Its companions cover the rest: expanding your business to India for the market-entry decision, company registration in India for the forms, documents and filing process, and doing business in India for how tax, GST and compliance work once you are running.

What are your structure options for setting up in India?

Five, and they are not interchangeable. Two are Indian entities you own, and three are extensions of your foreign company operating in India under Reserve Bank permission. That distinction drives both the tax and the restrictions, and it is sharper here than in general legal entity setup.

In practice the large majority of foreign companies incorporate a wholly owned subsidiary, and many run an EOR first and incorporate afterwards. The other four exist for narrower situations, and two of them come with restrictions that catch people out.

Before the restrictions, though, look at the tax column again, because it is the part that changes the financial model most.

How does your structure change the tax you pay?

By about ten percentage points, which is unusually decisive for a structuring choice and worth weighing alongside your wider India operating model. An Indian subsidiary is a domestic company for tax purposes. A branch or project office is your foreign company earning Indian income, and India taxes foreign companies at a higher rate.

• Subsidiary: can elect a 22% corporate rate, which lands near 25% effective once the 10% surcharge and 4% cess apply, in exchange for giving up certain deductions.
• Branch or project office: taxed as a foreign company at 35%, plus a 2% or 5% surcharge depending on income and 4% cess on top. As of July 2026 this rate reflects the reduction from the older 40% level.
• Liaison office: no tax on income, but only because it is forbidden from earning any. It still files returns and reports annually.

If you expect India to be profitable, the tax difference between a subsidiary and a branch usually outweighs the extra incorporation effort within the first year or two. That is the whole argument in one sentence.

There is more to the tax picture once you are trading, including GST, withholding and how profits get repatriated. That sits in doing business in India rather than here.

Tax is one half of the decision. What each structure is actually permitted to do is the other, and it is where liaison offices disappoint people.

What is each structure actually allowed to do in India?

This is the part that decides whether a structure is usable at all, and the limits are real rather than theoretical. Overstepping them can also create permanent establishment exposure. A liaison office in particular is far more restricted than its name suggests.

Liaison office: representation only

It may represent your parent, promote your business, gather market information and act as a communication channel. It may not earn income, invoice customers or carry out commercial activity, and it is funded entirely by inward remittance from the parent.

Useful for testing a market. Useless the moment you want to sell something.

Branch office: commercial, but not manufacturing

A branch can trade, provide services, run research and undertake wholesale activity, and it can earn income and remit profits. What it cannot do is manufacture in India directly, and it carries the 35% foreign company rate.

Project office: one contract, then it ends

Set up to execute a specific awarded contract, with a life tied to that project. It is the right answer for a single infrastructure or delivery engagement, often staffed on fixed-term contracts, and the wrong answer for building an ongoing India business.

Subsidiary and LLP: no activity ceiling

An Indian company can do anything an Indian company can do, subject to sector rules and the legal requirements for hiring in India. That freedom, plus the lower tax rate, is why it is the default. An LLP is available too, though foreign investment into an LLP carries its own conditions, so take advice before assuming it is the lighter option.

Knowing what you want to do narrows the list quickly. The next filter is who has to approve it.

Which structures need Reserve Bank approval?

All three foreign-company presences do. Indian entities generally do not, because most sectors sit on the automatic FDI route where you invest first and report afterwards. Tax registrations such as GST follow separately once you are incorporated.

• Subsidiary or LLP: incorporate with the Ministry of Corporate Affairs, then report the investment to the Reserve Bank. No prior permission in automatic-route sectors, which covers most of the economy.
• Liaison, branch or project office: apply through an authorised dealer bank to the Reserve Bank under India's foreign exchange rules. This is a permission process, not a registration, and it takes longer.
• Two things force the government route regardless: a restricted sector, or an investor from a country sharing a land border with India. Check your ownership chain, not just your own domicile.

How long does business setup in India take, and what does it cost?

Incorporating a company is measured in weeks; standing up a full operation is measured in months. Wisemonk's published India figures put entity setup at $15,000 to $40,000 one-time for a 50-person operation, with registration taking roughly 8 to 12 weeks and a full wholly owned subsidiary setup running 3 to 6 months.

Those are ranges, not quotes, and professional fees vary widely by city and adviser. For the itemised filing steps and document list behind the timeline, see company registration in India.

Three costs sit outside the setup fee and continue forever: an annual audit, ongoing registrar and tax filings, and someone competent to own the monthly statutory compliance cadence.

Set against the cost of hiring in India, that overhead raises a fair question, and it is one worth asking before you spend any of the setup money.

Do you actually need an entity in India yet?

Often not. If your reason for setting up is to employ people rather than to sell in the Indian market, you can hire employees in India without an entity through an Employer of Record, which becomes the legal employer while you direct the work.

The honest test is what you are trying to do, and if the answer is mostly hiring in India, the entity may be premature:

• Selling to Indian customers, holding local licences, or raising local capital: you need an entity, and a subsidiary is almost certainly the answer.
• Building a team that serves your global business: an EOR is usually faster and cheaper until headcount justifies the overhead. Compare the two properly in EOR vs entity in India.
• Not sure yet: start with an EOR and convert later. Moving from an EOR to your own legal entity is a well-worn path, and it is far easier than unwinding an entity you did not need.

How does Wisemonk help you set up in India?

Wisemonk is an India-native Employer of Record. We help global companies hire, pay, and manage employees in India, and we handle the compliance work behind every payroll cycle, whether you end up with your own entity or not.

More than 300 global clients work with us, we manage over 2,000 employees, we process $20M+ in annual payroll, and we hold a 4.8 out of 5 rating on G2 across verified customer reviews. EOR pricing starts from $99 per employee per month.

For companies working through the structure question, five things help most:

• Operate before you incorporate: we employ your India team while the entity decision is still open, so hiring is not blocked by a structuring debate.
• Entity and GCC setup when you need it: we handle company formation and registrations for teams standing up a global capability center in India.
• Payroll and statutory compliance: managed India payroll with contributions, deductions and monthly filings handled on schedule.
• Contractor engagement: as your Contractor of Record we become the contracting party for project-based work, with compliant agreements and local payouts.
• A clean handover later: when you do incorporate, we support the transition from EOR to your own entity so the team moves across without disruption.

We provide EOR services in India, and we are expanding rapidly into the US and UK markets.